There is a new consultation on charging the anti-money laundering regulated community- so that includes solicitor firms- for an increased fund to tackle money laundering and fraud.
It’s from HM Treasury. TLS is responding. The deadline is Tuesday, 13 October 2020.
HILS is inviting your comments so that we can provide a response on behalf of Members.
HILS comments are as follows:
- It would appear that the decision to impose a levy has already been made and we may only now be able to influence how it is applied.
- We are concerned about the added burden of having yet another levy on an already financially stretched and heavily regulated profession
- We question whether such a levy would be better collected by HMRC via taxation based on turnover, rather than by the SRA, which should be concentrating on regulatory functions, or any new body.
- How is risk to be calculated in order to assess the amount due for the levy? For example, some specialist firms with high turnover may undertake low risk business. A staged/phased levy on those businesses undertaking high risk work may be more appropriate, although our baseline is that we do not welcome a proposal for yet more “taxation” as proposed by this levy.
- it is difficult to see how equitable it can be to assess risk between different firms. A turnover or profit basis appears not to fairly reflect the risks between firms with differing areas of practice. We consider that funding from general taxation would seem a more suitable solution, with penalties etc from enforcement effectively offsetting the cost
Summary of consultation:
The paper says “The government believes it is fair that those whose business activities are exposed to money laundering risk pay towards the costs associated with responding to and mitigating those risks.” It aims to raise £100m a year. Some will be used to strengthen the Suspicious Activity Report regime (new IT, more staff) and some to expand the UK Financial Intelligence Unit (and make it a nicer place to work!!) and the Joint Money Laundering Intelligence Task Force (information sharing), improve Companies House data and provide more education (raising awareness) about ML threats.
One of the principles on which firms would have to pay this mandatory levy is in proportion to the amount of work you do that presents a risk. No figures for the amount of the levy have been presented.
The consultation proposes different ways of raising the money, such as increasing existing levies made by regulators, having a set levy across all sectors, having a variable levy based on business size, a levy based on the number of employees, beneficial owners or on the number of SARs made, or by being based on revenue or on profitability.
The Government favours a levy based on UK revenue (and asks if this should be UK revenue only, and whether it should be revenue from regulated work only) with the smallest businesses being exempt and thresholds at £1m, £5m and £10.2m (Companies House small business threshold). It is concerned that any exemption might seriously impact the income needed , with small businesses that might represent the highest risk. A flat fee for them might be an option plus an incremental rate once the threshold is reached.
The paper asks for views on whether risk should be a factor in calculating the levy e.g. based on SARs or on the firm-wide AML risk assessments which Firms have to do.
The levy might be set for each year or be subject to periodic review.
The levy would not be payable by individual partners; rather it would be payable at “partnership level”.
The levy could be collected via an agency (we would have to register) or by the supervising entity (for us TLS/SRA).
There are then questions about how to fund the fight against fraud.
Here is a link to the full consultation which provides details as to how to respond, if you wish to do so direct:
Alternatively, please let our Administrator have your comments as soon as possible by email, preferably by 7th October, so that we have time to consider your comments and compile a response by Tuesday,13th October.